New approaches must be taken to fight unemployment among young people, or the consequences will be dire.
How is this for dire.
In Bushbuckridge in Mpumalanga, the unemployment rate for youths between the ages of 15 and 24 stands at 87%.
And 84% of them live in income-poor households, with 63% living in homes in which no adult is employed.
In Matjhabeng in the Free State, the youth unemployment rate stands at 57% – a steep increase from 35% in 1996 and 53% in 2008.
Here is more, on a national scale.
At the end of last year, 40% of young people (7.7 million) between the ages of 15 and 34 fell into the category of Neet – not in employment, education or training.
And if you confine it to employment, the unemployment figure is currently sitting at 48% – up from 41% at the time of the 2008 global crash.
Put more starkly, the number of youths falling into the unemployment pool has risen by 140 000 every year, or 380 a day, over this period.
This dire picture is painted in a new study by the Centre for Development and Enterprise’s (CDE) titled Youth Unemployment: An Agenda for Action. The paper, released this week, puts forward a set of proposals to deal with this gigantic time bomb.
In the words of the CDE, this situation poses “an enormous challenge” and “a reality”.
“An unemployment crisis of this scale is not just a matter of the economy wasting vast resources, but the political consequences are equally serious,” says the CDE.
“Unemployed young people are more likely to engage in undesirable activities, including criminality and substance abuse, and to become disruptive presences in their communities.
“The political consequences of a large cohort of young people who lack confidence in the ability of their society to provide them with the employment and income they need to live their lives with dignity are also considerable.”
More critically, of policymakers and implementers the CDE says: “There can be no more damning critique of existing policy, with its emphasis on high wages and well-protected jobs, than this.”
The CDE calls for a different kind of thinking about fighting youth unemployment and argues that there is no one intervention that has the “scale and scope to make a meaningful difference”.
“What matters is not the size of the employment-generating projects, but their quantity. And the best way to get more employment-generating projects is to foster an economic environment in which [they] are growing quickly.”
Putting the main emphasis on spurring economic growth, as the CDE does, may seem obvious, but it is a point that cannot be overdone.
Stating that economic growth is “the most critical determinant of employment creation”, the paper says such a growing economy will allow “successful firms to expand faster” and save those that might have collapsed.
“Job creation is driven by the same things that drive economic growth: improving the business climate to improve investment, lowering the cost of doing business and building the kinds of social and legal institutions that allow firms that produce goods at competitive prices to prosper.”
Which then brings us to the political and policy realm.
CDE argues that these requirements have been far too often violated.
“The policy environment has become too unpredictable, with more and more downside risks. Regulatory requirements have become more numerous, more intrusive and some, increasingly perverse.
“Sovereign downgrades have increased the cost of credit. The costs of using economic infrastructure and of critical inputs like logistics and electricity have risen quickly. Labour relations, never smooth, are becoming more fraught and upward pressure on wages has increased.”
Make it easier to employ young people
The CDE paper suggests that legislation be introduced to make it easier to employ young people, who may be inexperienced and cheaper than the protected high-wage earners.
Young people are, in effect, locked out of employment by protective labour laws and a lack of mobility in the workforce.
“Young workers, whose inexperience means that employers regard them as likely to be less reliable and productive than older workers, cannot offer their labour to employers at a discount because of the labour laws and the lack of upward mobility in large parts of the labour force,” says the CDE.
Go labour intensive
“We should be looking to expand those industries that are particularly labour intensive, especially those that use unskilled labour,” it says.
“We should also focus on those industries that produce goods and services for the global market, if only because the rate of growth of those industries is not constrained by the size and growth of the domestic economy.”
While the proposal that interventions focus on labour-intensive industries should not find much opposition, the further suggestion that costs of employing people and employment costs (benefits) be reduced, will not find favour with labour, while the proposal to reduce subsidies to capital-intensive companies and industries will not go down well with sections of big business.
Saying that South Africa needs to “seriously rethink its approach to the challenge of youth unemployment”, the CDE adds that this labour-intensive focus must be accompanied by growth-encouraging reforms and zoom in on light industry and tourism.
Overcoming this crisis is key to transforming South African society, expanding the tax base and meeting the promises of the Constitution, the CDE says.
“If radical economic transformation and inclusive growth is to mean anything beyond a slogan, it has to have significant employment growth at its heart.”